Banco Espirito Santo SA will probably raise private funds to boost capital, Bank of Portugal Governor Carlos Costa said in Parliament, as talks with investment banks and investors show interest in the lender.
“It’s possible and very probable there will be a private solution for strengthening the capital,” Costa said today. “There are parties interested in taking a reference position in the bank,” investment funds and European banks, he said.
Costa is seeking to reassure depositors and investors that the bank can withstand any losses that may result from Grupo Espirito Santo’s financial difficulties as some companies within the group seek creditor protection. The central bank is sounding out Spain’s Banco Santander SA and Portuguese lenders to gauge their interest in investing in Banco Espirito Santo, El Economista newspaper reported today.
“I desire above all to rapidly rearrange the shareholder structure so that there is no need to apply the last resort, which is the recapitalization fund,” Costa said. I am “interested in reference shareholders appearing that are able to bring reputational gains to the bank,” he said.
Costa didn’t identify the investors and his remarks echoed what the central banker said July 16. BES shares fell as much as 4.5 percent and were 1.4 percent lower at 41.3 euro cents as of 3:46 p.m. in Lisbon today.
Portuguese Finance Minister Maria Luis Albuquerque said yesterday in Parliament that the government wasn’t preparing to recapitalize the bank and that there were no indications that state intervention was needed.
Banco Espirito Santo said last week it had exposure of 1.18 billion euros ($1.6 billion) to companies in Grupo Espirito Santo through loans, securities and other items as of June 30. The lender said it’s waiting for the release of that group’s restructuring plan to assess any potential losses.
Moody’s Investors Service cut Espirito Santo Financial Group SA’s rating yesterday for the second time this month to Ca, reflecting what it called the heightened risk of default combined with “significant” losses for bondholders. Espirito Santo Financial is Banco Espirito Santo’s biggest shareholder with a 20 percent stake.
“It’s desirable that one or two important shareholders show interest in the bank, enter the bank, and reinforce its capital,” Costa said today.
A Santander spokesman, who asked not to be identified by name, declined to comment on the newspaper report, when contacted by phone.